C. REVENUE

The following
table presents the Company’s product and recurring revenues disaggregated by industry for the three months ended March 31,
2018. Sales taxes and other usage-based taxes are excluded from revenues.

Hospitality

Education

Multiple Dwelling
Units

Government

Total

Recurring

$

90,924

$

10,460

$

154

$

–

$

101,538

Product

1,249,228

227,507

19,441

7,482

1,503,658

$

1,340,152

$

237,967

$

19,595

$

7,482

$

1,605,196

Contract assets

Contracts
are billed in accordance with the terms and conditions, either at periodic intervals or upon substantial completion. This can
result in billing occurring subsequent to revenue recognition, resulting in contract assets. Contract assets are presented as
other current assets in the Condensed Consolidated Balance Sheet. The balance of contract assets as of March 31, 2018 and at the
date of adoption of ASC 606 was $0.64 million and $0.35 million, respectively. There were $0.33 million of costs incurred to fulfill
a contract in the closing balance of contract assets.

Contract liabilities

Contracts
are billed in accordance with the terms and conditions, either at periodic intervals or upon substantial completion. Often, the
Company will require customers to pay a deposit upon contract signing that will be applied against work performed or products
shipped. In addition, the Company will often invoice the full term of support at the start of the support period. Billings that
occur prior to revenue recognition result in contract liabilities. As of March 31, 2018 and at the date of adoption of ASC 606,
contract liabilities were $1.67 million and $0.78 million, respectively. The change in the contract liability balance during the
three-month period ended March 31, 2018 is the result of cash payments received and billing in advance of satisfying performance
obligations, less $0.15 million of revenue recognized during the period that was included in the contract liability balance at
the date of adoption.

Contract costs

Costs to
fulfill a turnkey contract primarily relate to the materials cost and direct labor and are recognized proportionately as the performance
obligation is satisfied. The Company will defer cost to fulfill a contract when materials have shipped (and control over the materials
has transferred to the customer), but an insignificant amount of rooms have been installed. The Company will recognize any deferred
costs in proportion to revenues recognized from the related turnkey contract. The Company does not expect deferred contract costs
to be long-lived since a typical turnkey project takes sixty days to complete. Deferred contract costs are generally presented
as other current assets in the condensed consolidated balance sheets.

The Company
incurs incremental costs to obtain a contract in the form of sales commissions. These costs, whether related to performance obligations
that extend beyond twelve months or not, are immaterial and will continue to be recognized in the period incurred within selling,
general and administrative expenses.

The tables
below present the impacts of our adoption of the new revenue standard on our income statement and balance sheet.

For
the Three Months Ended

March
31, 2018

As
Reported

Balance
Without Adoption of

ASC
606

Effect
of

Change
Higher/(Lower)

Income Statement:

Sales

$

1,605,196

$

1,708,196

$

(103,000

)

Cost of Goods Sold

1,054,234

1,088,734

(34,500

)

Net loss

$

1,184,166

$

1,115,666

$

68,500

March
31, 2018

As
Reported

Balance
Without Adoption of

ASC
606

Effect
of

Change
Higher/(Lower)

Balance Sheet:

Assets

Contract Assets

$

644,479

–

$

644,479

Accounts Receivable, net

–

65,400

(65,400

)

Inventories

843,488

1,046,335

(202,847

)

Liabilities

Contract Liabilities

1,670,616

–

1,670,616

Customer Deposits

–

199,483

(199,483

)

Deferred Revenue - Current

–

357,975

(357,975

)

Deferred Revenue – Long Term

–

238,426

(238,426

)

Equity

Accumulated Deficit

–

498,500

$

(498,500

)

The table
below presents the cumulative effect of the changes made to our consolidated balance sheet as of January 1, 2018 after the adoption
of ASU 2014-09.

December
31, 2017

Transition
Adjustments

January
1,

2018

Balance Sheet:

Assets

Contract Assets

–

110,000

$

110,000

Inventories

777,202

239,000

1,016,202

Liabilities

Contract Liabilities

–

779,000

779,000

Equity

Accumulated Deficit

$

(119,724,656

)

(430,000

)

$

(120,154,656

)

Remaining performance obligations

As of March
31, 2018, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $1.0
million. Except for support services, the Company expects to recognize 100% of the remaining performance obligations over the
next six months.